Document
Facility Agreement
Financing Document
A Facility Agreement records the terms on which lenders make a specified loan or credit facility available to the project company. It typically governs commitment, availability, utilisation, interest, fees, repayment, prepayment, payment mechanics and transfers, while a separate Common Terms Agreement may contain the shared covenant and default package.
Document Guide
- Purpose
- The Facility Agreement converts a financing commitment into an operable funding instrument. It answers: how much the lenders commit; what the borrower may use the money for; when and how it may be drawn; how interest and fees are calculated; when principal must be repaid; when the facility may be cancelled or prepaid; how taxes, increased costs and illegality are handled; how lender participation may be transferred. Where several facilities finance the same project, separate Facility Agreements can preserve different currencies, lender groups, ECA coverage, pricing and repayment profiles while the CTA centralises the common project controls.
- Where It’s Used
- Greenfield project financing; PPP and concession projects; acquisition or refinancing of infrastructure assets; construction and term facilities; DFI/ECA-supported facilities; multi-currency and multi-tranche financings; bridge, VAT, working-capital, liquidity or standby facilities; bilateral, club and syndicated facilities.
- What It Governs
- The Facility Agreement principally governs facility-specific debt economics and funding mechanics. It may also contain representations, undertakings and defaults where no separate CTA exists. For a multi-document project-finance suite, the modular distinction is: Facility Agreement = facility-specific funding and economics; CTA = common borrower obligations, project controls and defaults; Intercreditor = creditor ranking, voting and enforcement coordination.
Typical Parties
- Project company / borrower
Draws and repays the facility
- Original lenders
Provide commitments
- Facility agent
Administers utilisations, payments, notices and lender decisions for the facility
- Intercreditor/common agent
Coordinates common financing matters where separate from facility agent
- Security agent/trustee
Holds transaction security for secured parties
- ECA/guarantor
Covers or guarantees agreed lender risks in supported facilities
- Arranger/underwriter
Structures, syndicates or underwrites the facility; often has limited continuing obligations
- Account bank
Receives disbursements or debt-service payments through project accounts
Transaction Lifecycle
- Mandate and term sheet
Commercial terms and underwriting strategy are agreed.
- Due diligence and credit approval
Facility size, tenor, conditions and risk allocation are tested.
- Documentation
Facility, CTA, Intercreditor, security and support documents are negotiated together.
- Signing
Commitments become contractually documented, subject to conditions.
- Conditions precedent
Legal, project, model, security and equity deliverables are satisfied.
- Availability/utilisation
Borrower submits drawdown requests and evidence.
- Construction
Utilisations fund eligible project costs and interest may capitalise where agreed.
- Conversion/completion
Construction debt may convert to term debt or repayment begins.
- Operations
Scheduled repayment, interest and covenant testing continue.
- Prepayment/refinancing
Voluntary or mandatory prepayments may reduce the facility.
- Default/enforcement
CTA and Intercreditor remedies operate in conjunction with facility payment rights.
- Final maturity/discharge
All principal, interest and other amounts are paid and commitments terminate.
Clause Intelligence
Core Clause Map
Facility structure, commitments and lender participationsDefines facility type, aggregate commitment, lender shares, tranches and whether commitments are several rather than joint.
Clause Function
What It Does
Defines facility type, aggregate commitment, lender shares, tranches and whether commitments are several rather than joint.
Why It Matters
The borrower must know how much funding is contractually available and whether one lender's failure affects others.
Who It Affects
Borrower, lenders, facility agent, arrangers and sponsors.
Purpose and eligible use of proceedsIdentifies eligible project costs, refinancing, fees, reserves, taxes, interest during construction or other permitted uses.
Clause Function
What It Does
Identifies eligible project costs, refinancing, fees, reserves, taxes, interest during construction or other permitted uses.
Why It Matters
Lenders price and approve credit for a defined project and funding plan.
Who It Affects
Borrower, sponsors, lenders, model auditor and disbursement advisers.
Availability period and commitment expiryEstablishes opening and closing dates, longstop, extension process and treatment of undrawn commitments.
Clause Function
What It Does
Establishes opening and closing dates, longstop, extension process and treatment of undrawn commitments.
Why It Matters
Construction delay can leave the project with costs but no remaining committed financing.
Who It Affects
Borrower, sponsors, lenders, EPC contractor and technical adviser.
Negotiation Intelligence
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